FDIC: Banks Can Enter Bitcoin and Crypto Markets Without Approval

The recent guidance issued by the Federal Deposit Insurance Corporation (FDIC) has ushered in a new era for banks under its oversight, allowing them to partake in bitcoin and cryptocurrency activities without the need for prior approval. This monumental shift reverses the stringent policies that were put in place during the Biden administration, bringing about newfound freedom for banks looking to delve into the crypto space.

In a groundbreaking announcement on March 28, the FDIC announced that banks now have the green light to engage in services related to cryptocurrencies, such as custody and trading, as long as they effectively manage associated risks. Furthermore, the FDIC plans to replace outdated regulations with more current guidance tailored to the evolving landscape of cryptocurrencies.

The FDIC’s initiative comes in the form of a Financial Institution Letter that nullifies the regulations from 2022, which mandated that banks secure FDIC approval before engaging with bitcoin and other cryptoassets. This bureaucratic barrier had been a source of frustration within the banking sector. By eliminating this obstacle, the FDIC empowers banks under its supervision to explore the possibilities of the burgeoning crypto market with greater flexibility, although specific permissions will still be subject to coordination among various agencies.

Acting FDIC Chairman Travis Hill characterized this policy shift as a crucial step towards instituting a more crypto-friendly approach that prioritizes security. Emphasizing the need for a departure from the ineffective strategies of the past few years, Hill stated, “The FDIC is turning the page on the flawed approach of the past three years.” Looking ahead, the FDIC plans to provide additional guidance in consultation with the President’s Working Group on digital assets.

Despite the regulatory uncertainty surrounding cryptocurrencies, several major banks have recently entered the space by offering bitcoin and crypto services. This move by the FDIC to relax restrictions on banks signals a broader shift towards embracing digital assets within traditional financial institutions. The FDIC’s new stance is poised to usher in a wave of innovation and expansion in the banking sector’s engagement with cryptocurrencies.